Mallinckrodt Pharmaceuticals' $6.7bn Merger with Endo
- katerinageorgiou5
- 23 hours ago
- 6 min read
By Edward Fung, Freya Zhang, Henry Yum, Sanghyeon Kim (HKUST); Moritz Ibe, Avital Anoff, Lukas Ehrlich, Annant Bhargava (University of St Andrews)
Photo: Roberto Sorin (Unsplash)
Overview of the deal
Acquirer: Mallinckrodt Pharmaceuticals
Target: Endo International
Total Transaction Size: $6.7bn (Enterprise Value)
Closed Date: H2 2025 (Targeted)
Target Advisors: Goldman Sachs & Co. LLC (Financial), Davis Polk & Wardwell, Paul, Weiss, Rifkind, Wharton & Garrison and A&L Goodbody (Legal)
Acquirer Advisors: Lazard (Financial), Wachtell, Lipton, Rosen & Katz, Hogan Lovells and Arthur Cox (Legal)
Announced March 13 2025, Mallinckrodt and Endo have agreed to merge in a stock and cash transaction, creating a combined entity with an implied enterprise value of $6.7 billion. Under the terms of the agreement, Endo shareholders will receive $80 million in cash, subject to potential adjustments, and hold 49.9% of the newly formed company, with Mallinckrodt shareholders retaining 50.1%.
The transaction, which includes a refinancing component, will be funded through a combination of cash on hand and $900 million in committed financing from Goldman Sachs. Upon completion, the combined company is expected to be listed on the New York Stock Exchange (NYSE) and continue to operate under the Mallinckrodt name, with Endo becoming a wholly-owned subsidiary.
This strategic merger brings together two complementary specialty pharmaceutical companies, both of which have recently emerged from restructuring linked to opioid litigation in the US. The combined portfolio includes Mallinckrodt’s key assets, such as Acthar Gel and Terlivaz, alongside Endo’s Xiaflex, a broad range of generics, and sterile injectables. Siggi Olafsson, current President and CEO of Mallinckrodt, will lead the combined company, and states that bringing together these two "essential pharmaceuticals organisations" will unlock their full potential.
"We believe this combination with Mallinckrodt, along with the subsequent separation of the combined sterile injectables and generics business, presents a unique opportunity to deliver significant shareholder value" - Scott Hirsch, Interim CEO of Endo
Company Details (Mallinckrodt Pharmaceuticals)
Founded in 1867, Mallinckrodt Pharmaceuticals (“Mallinckrodt”) is a global specialty pharmaceutical company focusing on developing, manufacturing, and marketing therapies for autoimmune diseases, rare disorders, neonatal care, and pain management.
The company operates through two segments: Specialty Brands, which includes autoimmune/rheumatology, neonatal respiratory care and hepatorenal syndrome; and Specialty Generics, which focuses on ADHD medications, active pharmaceutical ingredients, and controlled substances.
Mallinckrodt filed for Chapter 11 bankruptcy in August 2023 and subsequently delisted from the NYSE. It completed its financial structuring and emerged from bankruptcy in November 2023.
Founded in 1867, headquartered in Dublin, Ireland
CEO: Sigurdur (Siggi) Olafsson
Number of employees: 2,700
Market Cap: N/A
Enterprise Value (EV): N/A
LTM Revenue: $1.98bn
LTM EBITDA: $520m
LTM EV/Revenue: N/A
LTM EV/EBITDA: N/A
Recent Transactions: $1.2bn acquisition of Sucampo Pharmaceuticals (Feb 2018); $42m acquisition of Ocera (Dec 2017); $80.4m acquisition of InfaCare Pharmaceutical Corporation (Sept 2017)
Company Details (Endo International)
Founded in 1920, Endo has grown to become a multinational healthcare and pharmaceutical company. It is engaged in Branded Pharmaceuticals, Sterile Injectables, Generic Pharmaceuticals, and International Pharmaceuticals.
Endo dispenses 2.6 million products each month and offers 180 products to patients and providers. Additionally, the company has 60 products in the pipeline and operates a manufacturing facility that spans 1 million square feet. Through its medicines, Endo has tested treatments for 220 conditions.
The company has been transforming its portfolio by divesting non-core international businesses, such as the sale of its Canadian-based Paladin Pharma in 2025. It has also faced bankruptcy and lawsuit crises. In 2022, Endo filed for bankruptcy and agreed to spend over $500 million on opioid−related lawsuits. In 2024, it settled for $465 million under the federal False Claims Act for unlawfully promoting Opana ER, an opioid.
Founded in 1920, headquartered in Pennsylvania, USA.
CEO: Scott Hirsch
Number of employees: 3,116 (as of 04/03/2025)
Market cap: $1.62bn (as of 02/05/2025)
EV: $3.71bn (as of 02/05/2025)
LTM Revenue: $1.73bn
LTM EBITDA: ($79m)
LTM EV/Revenue: 2.16x
LTM EV/EBITDA: NM
Projections and Assumptions
Short-Term Consequences
Immediately after unveiling their deal, Mallinckrodt and Endo must secure antitrust clearance for overlapping generic lines and other regulatory sign-offs, so closing itself is an immediate risk that can stall integration work. Shares have already swung, Endo fell more than 4 per cent on day one, as event-driven investors position for the shareholder votes and deal spread, creating short-term volatility.
Management is targeting roughly $75 million pre-tax synergies in the first year, implying swift head-count cuts and back-office consolidation across a 5,700-strong, 47-site network. The merged group will refinance Mallinckrodt’s borrowings, leave Endo’s debt in place and draw on a new $900 million Goldman Sachs facility, meaning early liability-management and rating scrutiny. An immediate New York Stock Exchange relisting is planned, giving fresh liquidity but also opening the door to short-term speculation.
Because both companies have only just emerged from opioid-related bankruptcies, victim-advocate groups say the merger locks in trimmed settlement obligations, reviving reputational pressure at the very start of integration. Distressed-debt funds that swapped court-claims for equity therefore get an early exit window, adding potential selling pressure to the new share register.
Commercially, managers expect cross-selling of flagship brands such as Terlivaz and Xiaflex to help hit a 2025 revenue goal of about $3.6 billion, targets that must be chased from day one to reassure creditors and markets. Executives intend to bundle the combined generics and sterile-injectables arm for a rapid spin-off. Finally, with most production rooted in the United States, leaders hope to harvest quick margin gains from tariff advantages, but the same concentration heightens domestic supply-chain and regulatory exposure in the short run.
Long-Term Upsides
The merger of Mallinckrodt and Endo to form a global, scaled pharmaceutical leader is projected to offer strong long-term upside over the next few years. Financially, the combined company is projected to generate about $3.6 billion in revenue and $1.2 billion in adjusted EBITDA in 2025, with EBITDA margins around 34%, a significant improvement from their standalone levels. Assuming a conservative annual revenue growth rate of 5–6% aligned with the global pharmaceutical market’s 6.1% CAGR forecast through 2030, revenues could reach $4.5–5.0 billion by 2028, supported by portfolio diversification and operational scale.
The industry backdrop is favourable, with specialty pharmaceuticals, particularly oncology and autoimmune treatments, expected to grow at double-digit rates, fueled by innovations in biologics, personalised medicine, and Pharma 4.0 technologies, such as AI-driven drug development and automated manufacturing systems. The Pharma 4.0 market alone is projected to grow at a 19.7% CAGR from 2024 to 2030, reaching $40.3 billion, reflecting strong demand for digital transformation and sustainability in pharma manufacturing. The combined company’s diversified portfolio, including branded drugs and generics, positions it well to capitalise on these growth drivers, especially as it plans to spin off generics and sterile injectables to focus on higher-margin branded products.
ESG considerations also present a long-term upside. Both companies have faced opioid litigation, but the merger provides a platform to improve governance, environmental sustainability, and social responsibility. Given that companies with strong ESG profiles tend to outperform peers according to the Corporate Governance Institute, this focus could lower capital costs and enhance investor confidence. Overall, the merger creates a financially stronger, innovation-driven pharmaceutical leader well-positioned for sustainable growth and value creation.
Risks and Uncertainties
First, strategic positioning. The deal is a key turnaround for Mallinckrodt and Endo's repositioning in the pharmaceutical landscape. The two pharmaceutical companies have been litigated for fueling the widespread misuse and overdose of opioid painkillers that led to the opioid crisis across many states in the U.S.. Endo filed for bankruptcy due to fines and legal challenges in 2022, while Mallinckrodt had first filed for restructuring in 2020 due to opioid settlement and a second time in 2023 due to sluggish key product sales.
Secondly, financial fragility. The $6.7 billion deal secured $900 million committed financing, and senior secured term notes could mean further heightened leverage by Mallinckrodt amid existing litigation repayment schedules. Mallinckrodt currently stands at a 50% debt ratio, and Endo, with an existing equity deficit, signals dependency on the merger turnaround success to bring in additional cash flow to lower the debt level.
Finally, product dynamics. The two companies have carried out different divestitures to reposition themselves as specialty pharmaceuticals and dispose of non-core businesses. Endo has previously sold its international business, Paladin, and Mallinckrodt sold its Therakos division. The disposal essentially points to growing specialty pharmaceutical businesses. Meanwhile, the trimmed product portfolio could lead to concentration risk and imply higher revenue variation as key businesses swing. Endo’s specialty, injectables and generic pharmaceutical businesses, make up 84% of its total revenue, with its star product, Xiaflex, carrying more than 30% of the revenue. Mallinckrodt makes up around 90% of its business from specialty brands and generics products; its star product, Acthar Gel, drives roughly 30% of the pharmaceutical giant’s in-house revenue.